The 30 Minute Reno: Is it a renovator or a detonator?
How do you tell the difference between a property which is primed for a cost-effective renovation and one which is simply going to drain your cash?
Blogger: Paul Eslick, Justin Eslick & Geoff Doidge, The Reno Kings
It's a Renovator!
Frequently, you will see a house appear on the market that looks like it will need a lot of work – it may have been vacant for a time, or been inhabited by really messy hoarders, or never been maintained at all, or may have been damaged by a storm, a flood, termites or any number of other things.
These houses can go on the market for what appears to be a bargain price and less than their market value. If you have the borrowing or spending power to buy them and do them up, they can be a quick and easy profit. They’re a renovator!
Often there is can be a good profit margin in renovating a property like this, because if the house is located well, structurally fine and attractive to tenants (or buyers) it will rent or sell quickly and well.
If you know what you’re doing and are prepared to put that work in, you will find that the potential - and the profit margin - can be there. As long as you have done your research, there is a very good chance that you can turn a good profit which will allow you to go again with another property.
The operative phrase here is ‘As long as you have done your research’…
Or is it a Detonator?
When you are making your first steps towards becoming a property renovator, the biggest danger is landing yourself with a property that is a disaster from the start - financially it’s just not going to work.
The “renovator”, known as a “fixer-upper” in other parts of the globe, is a grand tradition of real estate. Many houses go on the market needing some work before they are truly habitable. Whether your intention is to fix up the house to live in, rent out or sell it on for a profit, you will need to do some work one way or the other – and because of the work involved, often these houses are available for a bargain price. However, it should be noted that not every house that is available for a low price is a bargain!
Sometimes, the ‘bargain price’ is too high! And sometimes, people only find this out after starting work.
A “detonator” or a “money pit” is a house which looks like a bargain when you initially buy it, but when you come to realize the extent of the renovations that need to be done before it is even habitable you realize that you will have to spend a ludicrous amount of money. If you are selling, you may not make a profit. If you plan to live there, you’d have been better moving in to an already suitable house and paying the extra money up front. Of course, by the time you have found this out, it’s already a little late. Seems impossible, but it’s true. This happens all the time.
Before buying an apparent ‘renovator’, we strongly recommend getting a pest and building inspection carried out on the property to find the extent of any damage to the property and to assess – and cost – the work that needs to be done to bring it up to scratch. This will go a long way to making sure it’s not a ‘detonator’ or at least a ‘leave it a loner’.
You may be pleasantly surprised (Hey- it IS a bargain!), or you may get information that warns you that you should not proceed with the purchase (Nope – it’s a detonator). Although it costs money to have the building and pest inspection, it is a tiny amount in comparison with the losses you can suffer if you get it wrong and it’s still immensely preferable to buying rashly and then spending time and money putting that decision to rights.
About The Reno Kings
“From over 70yrs combined experience & $40million in property holdings, Reno Kings Paul Eslick, Justin Eslick & Geoff Doidge show you how to make money in property."
The Reno Kings have been successful in property for over 35 years – and it hasn’t been by taking risks! And for 12 years now they’ve been showing people from all over Australia how to buy exceptional property deals, cleverly add tremendous value to residential properties through cosmetic renovation and development and to safely and successfully create wealth by building a property portfolio.
Justin has been teaching alongside Geoff and Paul for the past 5 years and his town planning and professional buying skills are so very powerful that they won’t touch a property without Justin first giving it the ‘go-ahead’. Others have come and gone, but the Reno Kings have always been there, powering along, using their safe and secure formulas to build up $40million worth of property. Thriving – not just surviving – through 35 odd years of property cycles proves that what they’re doing is right! And that’s why they get so many questions from property investors and why the media always go to them for help on property and renovation stories. The Reno Kings are the trusted name in property education.